COFFEE MARKET NEWS Week Ending: 19th Dec 2014
| 15th Dec | 16th Dec | 17th Dec | 18th Dec | 19th Dec | |
| NYC | 178.65 | 177.70 | 171.85 | 174.35 | 174.7 |
| LIFFE | 1936 | 1936 | 1915 | 1912 | 1896 |
| GBP / USD | 1.565 | 1.571 | 1.557 | 1.566 | 1.563 |
Commentary
Monday’s performance last week bucked the recent downward trend and seemingly added support to the market, but a support that was short-lived and by Wednesday the sellers had driven the market down, to close 8cts lower, and bringing NYC back in line with the negative trend channel reaching a 5 month low of 171.15. An uptick on both Thursday and Friday has renewed hopes that life can be breathed back in to the market, but with Christmas holidays looming, activity and interest in the terminal markets is likely to be somewhat subdued over the next 2 weeks.
The Liffe terminal market appeared to be stuck in a bit of a rut – rallies and dips soon correct themselves, though the overall tendency is one of negative sentiment as global stocks look relatively healthy in the short term. We have however touched 7 month lows with the latest prices posted, and closes below the 1950 psychological barrier to add to the bearish outlook.
Origin Activity
Brazil – Brazil is set to experience a break in its biennial cycle in production with a fall in production 2 years running – the first in over 20 years. Whilst this figure should ring alarm bells for many, it is supplied with the comparative news that internal consumption has flat-lined (at least for this year) after two decades of steady expansion. End of year stocks are forecast for a slight decrease to 6.9m bags. The reduction in Arabica production and increase in Robusta (Conilon) yields has helped to narrow the global Arabica / Robusta split from around 60:40 to 55:45
Colombia – After 2013/14 yielded almost 12.1m bags, forecast for the 2014/15 season will show a rise of over 400,000 bags to total 12.5m bags – a much healthier picture from a country that has suffered heavy losses over the past 5 years. Primarily due to widespread coffee leaf rust and berry borer, this had prompted an aggressive tree regeneration program that is now ‘bearing fruit’. Internal consumption will now be predominantly satisfied by domestically grown coffee, reducing imports from Ecuador and Peru by some 70%
Kenya – uncertainty and a lack of confidence in Kenya’s marketing system continue to pose pertinent questions regarding the traceability and accessibility of coffees from the country. Coupled with a much reduced crop anticipated for next year (around 40,000MT) will culminate in firmer pricing. Already differentials for AA’s and top grades are increasing, as exporters shorts need to be covered, and buyers stock up while they can.
Tanzania – Many of the Estates are well sold out for the season, and most have even shipped their inventory already. Differentials for premium coffees are proud, but plenty of FAQ qualities appear to be floating around, at least for another month or so. Asking prices are generally in line with expectations, though still firmer than a comparative Central for example.
Peru – cuddly looking bears with a penchant for Marmalade Sandwiches are not the only export from Peru – although this year, with close to a 1m bag decline in exports forecast, Paddington may be the most successful. Leaf rust and a slight rise in consumption figures will reduce Peruvian Exports by 21%.
Ethiopia – The 2014/15 crop in Ethiopia is well under way and dry mills are filling up for the new season’s coffees. Cherry prices however are looking very high indeed, which is resulting in some stratospherically high differential offers from exporters. If terminal markets continue to decline, some exporters may get their fingers burnt. Either that or there will be some very unhappy roasters. Volumes for the coming year are looking good, especially from the south, and quality is expected to be favourable (good weather patterns have been observed throughout) Traceability remains a concern (as it has every year since the introduction of the ECX) for many overseas buyers committed to their CSR programs and ethical buying policies and the ‘bag tagging’ ideas of the ECX are doing little to allay these.
